Tax hike question still dogs Pawlenty

When he was governor of Minnesota, Pawlenty backed a “health impact fee” — 75 cents per pack on cigarettes. It caused the biggest clash of his governorship, shutting down the state government. Pawlenty never called it a tax increase, but his critics certainly did.

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Fiscal conservatives are still uncomfortable with Pawlenty’s break with conservative orthodoxy on this issue, even though it seems unlikely to cost him much political capital in the veepstakes.

Republicans in Minnesota and tax critics believe Pawlenty broke his no tax increases pledge, and called the cigarette hike a “fee” as an end run around the pledge. Yet even Grover Norquist, the king of anti-tax movement who fought the cigarette tax at the time, now seems forgiving of Pawlenty.

Taxpayers League of Minnesota president Phil Krinkie – who served in the Minnesota House during the budget debate – said the fee’s impact on Pawlenty’s chances at higher office isn’t that simple.

“Was it a tax increase, absolutely. Do I think some 6 or 7 years later that it’s a disqualifier? No,” Krinkie told POLITICO.

At the time, Pawlenty defended the fee as a means to help put an end to a budget impasse with a divided state legislature. “I believe this is a user fee. Some people are going to say it’s a tax. I’m going to say it’s a compromise to move Minnesota forward,” Pawlenty argued in May 2005, at the heat of the debate. In his book, “Courage To Stand” he made the argument that the fee had helped “break the logjam” but that his victory “came at a price.”

“To break the logjam, I agreed to a seventy-five-cent health impact fee on cigarettes, as a compromise. I really disliked it, but it was the least-economically detrimental plan that would get us to an agreement. The fee was designed to offset the costs the state incurred in providing health care to smokers,” Pawlenty wrote, noting that there was “some snickering” around the fee.

Brian McClung, a former spokesman for Pawlenty, argued that the health impact fee is an “imperfect compromise,” but that Pawlenty has made that clear.

“Governor Pawlenty has said the health impact fee was an imperfect compromise and something that he regrets agreeing to. However, his record as a budget-cutting fiscal hawk is second-to none,” McClung said in an email to POLITICO. “

But Republicans familiar with the Minnesota debate and Pawlenty’s tenure as governor say he lost some conservative street-cred among the same grassroots activists and tea partiers that have been slow to embrace Romney. The Romney campaign – which typically does not comment on their selection process for a vice presidential candidate – did not respond to requests for comment from this article.